Cryptocurrency regulation is a topic that will always be widely discussed and debated. But with Canadian regulators publishing a proposal for cryptocurrency industry regulation, the future of cryptocurrency in Canada is the hot topic lately.
Cryptocurrencies in Canada are currently not legal tender, but they still have to be taxed. In 2014, the country brought entities dealing in virtual currencies under the Proceeds of Crime and Terrorist Financing Act. Then, in 2017, the British Columbia Securities Commission registered the first crypto-only investment fund.
Exchange regulations in Canada are currently inconsistent at the provincial level, but they are classed as securities at the federal level. As of January 2018, cryptocurrencies in Canada were characterised as securities by the head of Canada’s central bank.
The Canadian financial regulatory authorities are currently consulting over whether to impose regulatory frameworks on cryptocurrency exchanges.
The consultation comes after the QuadrigaCX scandal that has seen $190 million worth of customers’ funds locked up in cold wallets due to the sudden death of the exchange’s CEO Gerald Cotten.
The Canadian Securities Administrators (CSA) published the consultation paper to receive feedback from the Canadian fintech community on how to regulate digital asset exchanges.
Imposing securities laws on cryptocurrency exchanges would see the same laws apply as on traditional stock market exchanges, with audits and registration being required.
What could all of this mean?
“If the definitions are broadly interpreted, there could be significant dislocation in both cryptocurrencies and blockchain communities. This includes any blockchain company that has issued, sold, or traded a token,” says Amber D. Scott, CEO of Outlier Solutions.
These regulations will have a massive impact on all blockchain and crypto businesses and may result in a shake-up and consolidation of companies. Even though the proposed regulations could mean a loss of $60 million over 10 years for companies, it will also improve Canada’s international reputation and therefore make it easier for blockchain and crypto businesses to deal overseas.
New regulations could also mean that companies, including exchanges, will need to keep detailed records of all users and report any suspicious behaviour to the government. On top of this, they will also need to provide written policies and procedures and undergo certain risk assessments.
Blockchain and cryptocurrency businesses in Canada will have to wait 90 days before they find out the final verdict. However, it will more than likely take at least 15 months or longer for any regulations to be put in place due to the 12-month transition period for compliance that is currently in place.
Benefits of Canada bringing in regulation
By bringing in new regulations, Canada is helping to make it easier for companies to be compliant. One of the positive benefits will be the building of better relationships with the banking sector. The framework could make it easier for platforms to obtain and keep commercial relationships with banks, something that is an ongoing challenge for certain platforms.
With Canada bringing in new regulations, this may trigger other countries to do the same. If they do so, they will reap the same benefits that Canada will. These benefits will only help businesses and companies to grow and expand. If countries don’t start to follow suit, they will find themselves falling behind and losing businesses.